Categories
Personal Finance

December Networth

Since my move last month, things have been a little bit more expensive. In addition to the extra $170 / month in rent, I’ve been having to pay for applications to schools (~$90 / school) and to order transcripts ($8 each, at least two needed for each school).

Rent – $670
VOIP – $20
internet – $45
variable – $735
total – $1,470

My passive income rose slightly to $313.37, which is about 21% of my current expenses (way down from a high of 26%). Luckily I got the first payment from my passive real estate investment ($500) and payment from a contract I did a while ago ($500), so combined with my income from the condo I’m about even. This is good considering that I’m not working

My stocks were WAY down, until the rally last Tuesday pulled them back up which also helped my networth. It currently stands at:

Mortgage: $92,104.80
E-Trade: $24,790.36
Cash: $6,173.57
Condo: $143,500.00
Building: $12,553.50

Networth: $94,912.63

I took a bit of a risk and bought a bit of Washington Mutual ($2500 worth) mid month on margin. It promptly dropped significantly and has rebounded a bit, but killer dividend yield or not I’m worried I’m red lining in the investments a bit too much (and am probably not going to do any more buying until income starts coming in again or I’ve at least been accepted somewhere).

Like everyone, I expect the holidays to be a bit more expensive then a typical month. I haven’t had to touch my line-of-credit (which is ready and waiting with $20K once I’ve used up my cash) and I’m currently hoping / expecting my cash reserves to last until I start my PhD program (in May or Sept). The University of Alberta and the University of Waterloo are looking like the two strongest contenders right now…

Categories
Announcements

Saturday Weigh-In and LinkStuff

Weight – 185 pounds so no change from last week. I can’t say I’m too disappointed since the weight loss has been quicker than I expected up to last week so having a flat week is ok. I kept going with the diet and even went jogging once which helped make up for the fact that I’ve basically put the bike away for the season.

This is a pretty interesting article on Canadian bank stock valuations – if you look at the second half they talk about the “tactics” of hedge funds spreading rumours about the banks and then shorting them.

This week we had posts in the Carnival of Personal Finance which was hosted by Stock Trading to Go and the Carnival of Financial Planning hosted by The Skilled Investor’s Personal Finance Blog.

Categories
RESP

RESP – Keeping It All In Perspective

This post is part of the Big RESP Series. See the entire series here.

See the previous post on How To Get Started.

Since the government started giving grants for RESP contributions in 1998, the RESP program has become quite well known and has become a new source of stress for new parents. I know a lot of friends who have set up RESPs for their kids which is great since most of my friends are older parents and have reasonably good finances. For someone who is younger and/or doesn’t have great finances, RESPs should probably be a lower priority to things like lowering debt and saving for retirement. It’s important to make sure your own finances are in good shape before saving for a future expense when you don’t know how much that future expense will be or if it will even occur. There is no point in making RESP contributions and then later on you have to withdraw the money to pay for the mortgage.

Try not to listen to the hype from investment companies – the same people who write the ads that try to scare you into investing with their company (you need 70+% of your income to retire or you will be living in a cardboard box) also create the ads for RESPs. Investment companies often come up with fairly “worst case” scenarios for their projections of how much post secondary education will cost in 18 years or so. They try to make it sound like your child’s education will cost a certain large amount and if you don’t have that much saved up when they finish high school then they won’t be able to go on to post secondary school.

The reality is that most parents (hopefully not me) are still working when their kids go to school so they always have the option of diverting some of their income to make up any shortfall. The investment company ads also don’t seem to include the fact that most students work during summers and can offset a portion of their schooling that way. The last point I want to mention here is that like most things in life, post-secondary education involves choices that cost more or less money. If a student can live at home and go to school, that is much cheaper than going to school in a different city. The student may not like that choice but sometimes money (or lack of) can help simplify the decision making. Other factors that I can think of are housing – do they live in a dorm, shared accommodation or their own apartment? Do they have a car? All these choices will play a significant role in the amount of money required for the students education.

Summary

RESPs are a good thing but they are not as important as your family finances. You are not doing the child any favours by maxing out the RESP grants but they can’t participate in some activites because you don’t have enough money.

Establish your family finances first, then worry about the RESPs. You can carry forward the contribution room so there is no rush to start the account as soon as the child is born.

Categories
Opinion

Looking for a Good Woman

SWM seeks a good woman who:

  • Knows how to keep books, do taxes, and earns a good income
  • Knowledge of Canadian investment or real estates laws and taxation rules would be a plus
  • Can manage rental property duties such as:  screening tenants, small repairs, renovation estimates, managing contractors, rough property appraisals, negotiations, etc
  • Lives frugally, doesn’t like expensive food, vacations or entertainment
  • Ideally owns an extensive investment portfolio and / or real estate

Please include pictures of the real estate and copies of your portfolio holdings when you contact Mr. Cheap at cheapcanuck@gmail.com.

Categories
Real Estate

Anecdotes and Advice from a First Time Home Buyer Part 8 – Condos and Taxes

My friend Christine has kindly agreed to write a series of posts on her experiences with buying a home for the first time which will be posted occasionally. See Part 7 – A Close Call.

Condo Show

After a dismal period of viewing unappealing and expensive properties, we decided to attend the Metro Toronto Condo Show just to gauge our options. It seemed like a good way to learn about the basics of a condo purchase. And admittedly, a new or near-new development is appealing in that it would be maintenance-free and likely decorated in our style.

If we hadn’t already been aware of the target demographic for many of the new condos, the Condo Show was attended mainly by early 20-somethings and to a lesser extent, retired empty nesters. The show added little to our knowledge as we had already done some research. There were only a few condo representatives on hand, and they had little hardcopy information. The free condo magazine was useful, but much of the information it contained was already online as well. The majority of exhibitors represented flooring, closet and furniture retailers.

What we were able to take away from the experience was that the newer buildings tended to have smaller units. The luxury condos offered larger units and a more mature crowd, but had heftier prices. On the whole, many of the more affordable buildings did not suit us in terms of their locations in the Entertainment District, along the Harbourfront or in Liberty Village. Buildings in the neighbourhoods we do like are not necessarily cheaper than a house. The main advantage is that condos are move-in ready. Older resale buildings do seem to offer larger units so may be the route we choose.

Municipal Land Transfer Tax

It was with great anxiety and inevitability that I read about the approval of the municipal land transfer tax on October 22, 2007. The tax will be levied on Toronto home buyers and is paid in addition to an Ontario Land Transfer Tax.

Just what are the implications of the new tax? It comes into effect on February 1, 2008 and will work on a sliding scale according to the purchase price. Therefore, a $500,000 home would be taxed at three different tax levels.

Home Purchase Price

Toronto Land Transfer Tax

up to $55,000

0.5%

$55,001 to $400,000

1%

over $400,000 (for one or two-family residential properties)

2%

over $400,000 to $40 million

(commercial properties and multi-residential units)

1.5%

over $40 million

1%

The exceptions to the new tax are for homes purchased with a signed legal agreement by December 31, 2007 even if the closing date falls after February 1, 2008.

First-time home buyers receive a tax break by way of a $3,725 rebate for properties costing up to $400,000. The portion of the purchase price which exceeds $400,000 is still taxed at 2%. In effect, that means that first-time home buyers of properties costing less than $400,000 are exempt from the tax.

While conscious of the looming December 31, 2007 deadline, we are still at the mercy of market availability. After all, a house is too large a purchase to make rashly just to save some money.

Categories
Opinion

The Tipping Point – I Hate Tips!

I hate tipping of any sort and I wish the practice didn’t exist. Don’t get me wrong, I tip at restaurants and bars like everyone else, but I don’t like it.

I’ve heard that tipping is a way to make up for a lack of a decent wage for waiters, delivery persons etc who have to work hard. My question is why can’t they get paid a market rate like everyone else? What is different about restaurants and bars?

Another reason I’ve heard is that you should tip for good service. My question is, if the person is just doing their job then why do you have to pay extra?

Most workers get compensated for doing a good or exceptional job by raises, promotions, bonuses which comes from the employer. I realize this compensation gets passed back to the consumer and I’m fine with that. I’d rather that food prices in restaurants go up 10% to pay for a better wage for workers (if the wages are too low). I also haven’t noticed any correlation between tipping and service – it appears that most waiters expect a tip and their performance is based on other factors.

There are some odd occupations that can get tips, baggage handlers at the airport? Shouldn’t you get arrested for that?.  One of the things that bugs me the most about tipping is why some workers get tips and most don’t?

It seems that waiters and bartenders, delivery workers are the biggest recipients of tips. But if you tip a bartender for grabbing a beer and removing the cap for you, why don’t you tip the person who works at the beer store who has to go into the back and grab the beer? What about gas stations attendants? What about the postman? Do you give them a tip for making it to your house that day?

How about if you get great customer service on the phone? Do you offer to paypal a tip to them? And what about the ten year old in Asia who spent part of his 12 hour work day on your new running shoes, did anyone tip him? I just can’t understand why some people get tips and others don’t.

In Australia, there are no tips in restaurants and when I was there a few years ago, I didn’t notice the service was any worse than it normally is here in Toronto. The other great thing about Oz is that both tips and  taxes are included in the menu price so whatever the menu price is, that’s what you pay.

When you go to the dentist/doctor – do you give them a tip? What about their receptionist? If they do a great job why not reward them a little extra. What about your bus/street car driver? What about your co-workers? If one of them gives you a little extra help do you give them a tip?

And what about social situations where you have a group bill and different people want to tip different amounts? I personally think that generally 10% of the gross bill is sufficient, but many times I’ve been in the situation where I’m out with friends and the bill might be $100 – I think we should leave $10 tip, $15 max (we’re talking very average service here), but some guys want to leave $20, and some guys want to leave $30 or $35?

Never mind the fact that the amount they put in doesn’t always correspond to the amount of tip they think we should be leaving. Do I have to put in extra money to make up for the fact that someone else wants to overtip? Do they have to put in extra to make up for my lessor tip?

I read a great story a while ago (can’t remember where unfortunately) where the person went out to lunch with some co-workers, they had individual bills, and one of her co-workers thought she gave too much tip and proceeded to take some of the tip and put it in her own pocket (I call this stealing).

Am I out of line here? Does it not make more sense if tipping didn’t exist and let the work/wage equation sort itself out?

Categories
Announcements

Applying for a PhD

As regular readers know, I’m currently moving towards becoming Dr. Cheap. The first step in any graduate program is being accepted. This is somewhat different then applying for an undergrad, but luckily I’ve gone though a Masters program so I pretty well know what to expect.

If you want to read more about grad school from someone who has been through it all – check out the new site Ivory Tower Unlocked.

In very general terms, one of the biggest differences between graduate work in Canada and graduate work elsewhere in the world is that for research / academic programs (e.g. not law, medical or business school) there is usually funding provided to cover tuition and living expenses while in the program. The living expenses is enough that some grad students can even afford to have a car (its about $22K / year for Masters students and $24K / year for PhD candidates). Many people, even here in Canada, don’t realize that you can make money while studying, instead of going into debt.

In fact, amazingly, this is even true for international students. The “official” explanation why we’d want to use government funds to pay people from other countries to learn (then take that knowledge and benefit their own economy instead of ours) is that it creates a superior academic environment, which then benefits the schools’ other profs, students and country. Beats me if this actually works out, I’m just glad that many foreign students decide to settle down in Canada after finishing their grad work (we should offer automatic citizenship after graduation from an advanced degree to encourage those who might stay). My best friends, while working on my Masters, were all Chinese, so I certainly benefited from this.

The application process itself is quite similar to a Masters application and varies little between schools. You fill out various demographic info (like your address, SIN, etc). Recently this has gone on-line, which is cool compared to the old fashioned paper forms I filled out years ago. You need to get recommendations from 3 academic sources (which is a pain in the butt). These are professors that you had a good relationship with who’ll fill out a form saying “he’s a good guy”. Profs act like they’re doing you the biggest favour in the world filling out these damn things (for my Masters I had a reference belly ache that I’d only given him a MONTH to fill it out).

You need to order transcripts from your previous degrees, which is only annoying in that it takes a little while and costs a bit of money (~$8 / transcript). Speaking of costs, most schools will charge you $80-$90 to apply (money grubbing bastards!).

International students have to submit a GRE (to prove they’re smart) and a TOEFL (to prove they can speak English). Its definitely nice, as a Canadian, that I don’t have to prepare for and take an aptitude test.

The applications also require your CV (which is subtly different from a resume – more academic), supplemental info (which is often restating information from your transcripts so that lazy profs who are considering supervising you don’t have to do much reading) and a form where you discuss your research interests (which usually involves looking at faculty at an institution and deciding, by surprise coincidence, you’re interested in EXACTLY their area of research, what a shock!).

After you get your application in (definitely by the deadline, the earlier the better), they make it available for professors who have funding for graduate students. Profs apply for funding, and as part of the application they talk about how many grad students they’re going to take on (which the people awarding the grants view as a good thing). They then use this money to take on graduate students (so profs who get lots of grants, have lots of money and can take on lots of students). If you get a scholarship, which Mr. Cheap was too late to apply for, you become inexpensive for a prof (plus they’re reassured that you’re a smart cookie: if you get NSERC or OGS you can pick the school and prof you want to work with).

Once you’ve been accepted, you start your program (which often involves course work at the start). You get a check every month and have to be a TA usually to earn part of it (which is light work throughout the term, maybe 10 hours a week). Usually within 5-7 years you finish your thesis, which is a major project that represents new knowledge in the area you’re working in (the trick is to pick a very specialized area so that not many people have done work in it and its easy to come up with something new).

Less then 50% of people who start a PhD finishes (and virtually no one who starts a part time PhD finishes). Often you’ll do research in an area, find there isn’t anything interesting to do a thesis on, and after 2 years you have to start over from scratch (which has happened to friends of mine, it is obviously incredibly demoralizing, and this is often the point people drop out at).

In terms of interpersonal dynamics at a university, I like to think of it as a family. Undergrads are babies (they’re cute and can be safely and easily ignored), professors are parents, Masters students are children, and PhD candidates are surly teenagers. You develop a love/hate relationship with your supervisor that is very similar to a parent/child relationship (at least it was for me). They help you, but at that same time are often quite patronizing.

Anyone who has finished grad work (Wooly Woman for one), what do you think of this write up? Does it match your experience?

Categories
Announcements

Saturday LinkStuff

Weight update: 185 pounds, down one pound from last week and seven pounds overall. Didn’t ride as much this week but my diet was pretty good.

Financial Blogger had a very interesting two part series describing a potential relationship with a bank. Check it out.

Million Dollar Journey had a great series on the efficient market hypothesis (EMH) which I thought was fantastic. There are three posts – Part I, Part II and Part III.

Carnival of Personal Finance was hosted by Moolanomy this week.